International Trade Operations - Jordanian Oil Limited

Introduction1

Discussion1

Overview of Jordanian Oil Limited1

Economic Overview of Jordan2

Risk Exposure to Jordanian Oil Limited3

Currency Risk3

Risk of Changing Trade Policies3

Risk of Cultural Variables4

Political Risk4

Regional Trade Bloc (RTB) of Saudi Arabia5

Movement in Domestic Currency against Dollar6

Key Factors Affecting Foreign Currency9

Key Characteristics of Available Hedging Instruments9

Conclusion10

References12

Appendix16

International Trade Operations - Jordanian Oil Limited

Introduction

The paper aims at analyzing the international trade concerns of a Jordanian Olive Oil producer that wishes to export its products to Saudi Arabia. The paper assesses possible risk exposure of the invented company in the domestic and foreign trade market. Moreover, the paper discusses key characteristics, advantages and disadvantages of Saudi membership with the identified bloc of regional trade.

In the light of recommended sources and international economic reports, the paper provides close inspection of key factors and FOREX trends that may affect domestic and foreign currency of trade. In addition to this, the paper evaluates prime attributes of possible hedging instruments that are available to the invented Jordanian Olive oil production company. Finally, the paper draws a conclusion on the overall understanding of various aspects of international trade that may affect existence and performance of a domestic company in an international market.

Discussion

Overview of Jordanian Oil Limited

Jordanian Oil Limited situated in Jordan is a producer of olive oil. The company is recently invented with an extensive and heavy investment in capital. In the face of olive oil production and state history of oil trade, the company has huge potential to penetrate and survive the tough competition of international oil market. In the given scenario of international trade, the company is hopeful and forward looking to export its business products to the country of Saudi Arabia. However, there are certain elements of international and macro environment that need to be well addressed before stepping beyond domestic boundaries of Jordan.

Economic Overview of Jordan

Jordan is small Arabian economy that has suffered from several economic shocks during the early years of its existence. The country first achieved economic boom in 1970s, when it posted first ever double digit economic growth (Library of Congress, n.d.). The country has a good agricultural profile with 8th ranking among the largest olive oil producers of the world (Jordan Times, 2011).

Figure 1: Olive Oil Production in the World (Vossen, 2007, p. 1094)

According to economic reports, Jordan has a growing capacity of generating annual 20-24 tons of oil with approximately 17million trees of olive (Jordan Times, 2011). The country has been known for prime quality olive oil and recent government policies are setting direction on attracting foreign investments in the oil industry. However, political instability and higher cost of production are few of the underlying reasons that provoke prosperity of the oil industry, in Jordan (Chamber of Commerce, 2012).

Risk Exposure to Jordanian Oil Limited

A company stepping beyond the national boundaries may face countless challenges and risk exposures due to changing economic and environmental conditions. In case of Jordanian Oil Limited, following are the possible risks that might be faced by the company in doing export business with Saudi ...